© New Balkans Law Office 2019

New Balkans Law Office: Bulgarian Lawyers

Restrictions on the acquisition of Bulgarian agricultural land


As Bulgarian agricultural land has been appreciating to approximate Europe-wide land values, and as Bulgaria is discovered as an investment destination more generally, and thus the demand for and implied price of land currently set aside or zoned as agricultural increase, international investors are increasingly interested in receiving advice on the restrictions that may apply to holding Bulgarian land, and specifically those applicable to non-EU investors acquiring currently agricultural land.

In this note, we begin by looking at the applicable law, before raising the issue of the practical implications of such restrictions for purchasers or those who acquire such assets as part of a transaction.

We suggest that the restrictions, properly interpreted, are in fact narrower than is commonly assumed. However, in practice (and this applies particularly to an acquirer), notaries have considerable freedom to express preference to as what they feel an acquisition structure should look like to be compliant. A risk-averse approach therefore makes it preferable to discuss with a notary in the area where land you intend to hold is situated, and we hope our note will be helpful to inform such discussions.


The Bulgarian Ownership and Use of Agricultural Land Act 1992 (the Act), substantively amended most recently in 2014, restricts the acquisition and holding of property rights in ‘agricultural land’, a phrase which is defined in the Act, by certain categories of entities and persons. Specifically the Act restricts ownership of agricultural land by non-EU and non-EEA individuals and companies.

Lesser rights in real estate are not within the Act’s scope.

The Act defines agricultural land as land which is not ‘purposed’ for agricultural use (it is unclear whether certain land may be deemed agricultural based purely on its administrative status for the purposes of the Land Zoning Act, or an objective measure like whether or not the land being capable of certain use or yet further, the use to which the land's owner puts it). In addition, such land must not be (among others):

  • zoned for development by way of a Detailed Zoning Plan, etc; or
  • afforested;

Subsection 3(4) of the Act expressly permits such agricultural land to be held by foreign nationals and companies pursuant to international treaties to which Bulgaria and the relevant foreign state are parties.

Subsections (5) and (6) of s 3, which was introduced in 2007, at the time of Bulgaria's accession to the EU, contain express reservations for EEA (including herein EU, unless specified otherwise) nationals (subs 4) and companies (subs 5): these are expressly allowed to acquire property interests in agricultural land.

In 2014, section 3 was amended further, introducing a number of express restrictions on who can acquire and hold agricultural land. The following were prohibited:

  • companies whose shareholders are directly or indirectly companies registered in low tax jurisdictions (a definition and list of these are given elsewhere in Bulgarian law);
  • companies whose shareholders are individuals, other than those in s 3(4) or 3(5), or companies, except those in s 3(4) or (5);
  • joint stock companies with bearer shares.

It follows from the wording of s 3 of the Act that where agricultural land is held by a company which is itself held by another company (whether registered in Bulgaria or another EEA member state), such land can be lawfully held by this structure as long as its shareholders are either:

  • individuals;
  • any company, as long as it is not registered in one of the proscribed low-tax jurisdictions.

While subsections 4 to 6 of s 3 appear to be a list of what is permitted, they should not be interpreted as a closed or exhaustive list: s 3 as a whole is a mixture of permissive and restrictive provisions.

A further amendment to the Act in 2014 introduced section 3C (3в in the Cyrillic alphabetical order). Subsection 1 of this sets out a further permissive provision: individuals who have resided in Bulgaria for 5 years or more are permitted to acquire agricultural land, as are legal persons established (in Bulgaria) for a period of 5 years or more.

While at first sight s 3C(1) could be taken as introducing a further filter, an additional requirement, that this is not the correct interpretation becomes clear given that the provision does not distinguish between Bulgarian nationals and foreign nationals.

If s 3C(1) were intended to be read as a restriction, it would have prohibited Bulgarian individuals who have not been resident in Bulgaria for 5 years or more from acquiring land as much as it would prohibit foreign nationals (including the EEA foreign nationals who are otherwise permitted). Such a restriction would appear to be a violation of Bulgarian nationals’ constitutional right to property by imposing an unwarranted requirement of residence as a pre-condition to holding certain types of property and a violation of Bulgaria’s EU obligations by introducing a discriminatory provision and/or a provision impeding freedom of movement of labour, capital and of establishment (which are otherwise protected) which will generally be impermissible, except on very clear grounds and with a very express intent.

On the other hand, read as a provision that enables some otherwise restricted non-nationals to acquire agricultural land after a qualifying residence period, the provision makes good sense.


Therefore, excluding any assistance that non-nationals may derive under international treaties, the following are restricted from holding Bulgarian agricultural land under OUALA 1992:

  • Companies whose shareholders are directly or indirectly registered in “low tax” jurisdictions (s 3(7)(1));
  • Bulgarian-registered companies whose direct shareholders are nationals of non-EEA countries, unless they meet the proviso of having resided in Bulgaria for 5 years at the material time;
  • Non-EEA nationals holding or acquiring directly (unless they have resided in Bulgaria for more than 5 years);
  • Companies which have issued bearer shares.

For further information, please contact us. We will explore your individual case in detail and provide you with tailored legal advice.

International Comparative Legal Guide to Real Estate 2016

The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal
information on a range of practice areas.”

ICLG Real Estate 2016

The series covers 33 jurisdictions for real estate, and reviews different topics in real estate law, including ownership, real estate rights, system of registration, the registry or registries in a given jurisdiction, the real estate markets of such jurisdictions and the liabilities of buyers and sellers in real estate transactions.

New Balkans Law Office’ Partner Kamen Shoylev and Associate Irina Stoyanova were the authors of the Bulgarian chapter of ICLG Real Estate 2016.

Click here to read the ICLG Bulgarian Real Estate Chapter 2016.

This article appeared in the 2016 edition of The International Comparative Legal Guide to Real Estate, published by Global Legal Group Ltd, London.

Insurance exclusion clauses in Bulgaria

We were instructed by a British client, who had after a number of years of working as an expatriate, invested her savings in a house on the Bulgarian Black Sea Coast in which she and her husband intended to spend the next years of their lives.  Sadly, her insured property was fully destroyed by a fire.

As required in certain cases of damage (generally, high-value ones), the local police force and prosecutor's office had initially investigated the fire, but had concluded that it had been caused by a storm and therefore had been no-one’s fault.

The insurer had refused to pay any compensation under the insurance policy which our client had taken out for the house.

The insurer based its refusal to pay out on its General Terms. These contained a provision which it alleged gave it the right to refuse compensation where the loss was caused by a construction defect and/or changes to the building's interior, which were in breach of construction regulations.

According to a report produced by the insurer, the cause of the fire was related to a fireplace and appurtenant chimney (neither of which were part of the planning permission for the house). The report found that the chimney had been built in violation of a construction regulation requiring that it should be at least 10 cm from any wooden elements in the roof.

Given that the official investigations (by the Police and the Public Prosecutor) had found that the fire had been caused by a storm and not a construction defect, we felt that our client was entitled to be compensated. Following a failure of the insurer to settle out of court, we eventually issued a claim against the insurer on behalf of our client.

Somewhat surprisingly, in the course of the proceedings, first a single court-appointed expert, then a panel of three such experts, confirmed the insurer's position that the cause of the fire had been a construction defect and not the “official” view of the Bulgarian police and Public Prosecutor. This required a complete reconsideration of our initial strategy on the fly.  This new, expert, evidence (which stood unrefuted) was that the fireplace and chimney had been improperly and unlawfully built.

We decided to submit that since:

neither the fireplace, nor the chimney had been built by our client or on her direct instructions; and
our client had bought the house with all necessary building permits, including a valid Use Permit; and the defect (that the chimney was actually touching the wooden roof) was latent and not visible, she could not be held liable and the risk should  still be covered by the insurance policy.
Both the first and the second instance courts found in favour of the insurer emphasising that there had been a specific liability exclusion term agreed by the parties which was incorporated in the insurance contract (from the General Terms).

We had solid grounds for our view, and our position was vindicated when the case reached the Supreme Court and the prior decisions were reversed. The Supreme Court accepted that as the insured had not built in breach (nor had instructed an breaching construction) of the fireplace and the chimney, the insurer had to compensate for the loss caused by the fire. Very soon after final judgment, the insurer voluntarily paid the insured amount.

The Supreme Court's judgment in this case has binding force for all Bulgarian courts in similar disputes.

It is not rare for insurers’ arguments for refusal of payment under an insurance policy to not stand up to scrutiny in court. This is so even where the insurance contract’s clauses might appear on their face binding for the insured and to preclude recovery.

In this case, the wording of the contractual clauses did not distinguish as to who had carried out the unlawful works - judging from these clauses, whether they had been carried out by the insured itself, her agents, or any third party, the result could be argued to be the same: the insurer did not have to pay.

Being able to demonstrate that a literal interpretation of this contract was inappropriate was decisive for the judgment in our client's favour.

From our experience in insurance law, we would recommend to clients to seek specialist legal help in interpreting an insurance contract's terms, where an insurer refuses to pay under a policy.

A consultation with a specialist should allow you to have a much more confident view of your chances of success, no matter how convincing (and therefore hopeless for you) is the wording used by the insurer in its standard policy documentation.

The case did not directly engage a discussion of consumer-specific principles of law (including European Union consumer protection directives), as our client had purchased the property through a wholly-owned Bulgarian company, but in other cases, these would provide an additional reason to read down overly wide or general exclusion clauses in insurance contracts.

Possibilities of Acquiring Property Owned by a Deceased Relative

Q: A family member died in Bulgaria and I am aware they had a property (and a company registered there). How do I go about acquiring it?

A: Where a person dies without leaving a valid will, Bulgarian law has rules about dividing the deceased’s estate between certain of his family members. Where the deceased has left a will, Bulgarian law would still set aside certain shares of the deceased’s estate (or at least such estate as is in Bulgaria) for certain close family members. These are known as ‘reserved shares’ and there are relatively simple rules determining whether they apply. 

If your family member’s Bulgarian company owns the property of your deceased relative, and the company was itself solely owned by your deceased relative, you and any other heirs would need to declare before the Bulgarian Company Registry that you wish the company to continue trading. You and any other heirs would also have to apply to register as shareholders of the inherited company shares with the Company Registry. To do this, you need to present evidence of the death of your relative, as well as of your capacity as his or her heir(s).

If the family member was not the sole owner of the shares of the property-holding company, and there are other shareholders, you need to check if you can become a shareholder. This would usually depend on the provisions of the company’s Articles of Association and on the consent of the remaining shareholders. In case such shareholders refuse to let you (or other heirs) become shareholders, you will still be entitled to receive compensation. This would be equal to such part of the company’s net assets which is proportionate to your relative’s share in the capital of the company at the time of distribution.

Regulation of the Management of a Complex

Q: How is the management of a complex regulated?  What do I need to be aware of?  [Condominium Act etc]

The Bulgarian Condominium Management Act (“CMA”) is a statute which regulates relations between owners in a development. The owners may have also approved a governing document which further fleshes out the way in which the running of the development is organised.

By law, the owners of units in a property development can use the common areas of the development and share in their management. Each owner has a right to enjoy his property without interference from the others.

According to art. 6 CMA, owners must also:

- not cause damage to other properties within the development and common areas;
- avoid causing more than minimal inconvenience to other owners or occupants;
- not tamper with any part of the development (whether buildings, shared areas, etc.) intended for general use;
- comply with the resolutions of the governing bodies of the development;
- cover the cost of repairs, reconstruction and renovation of the common parts, its facilities and equipment, and contribute to a fund for the "repair and improvement" of the development, in proportion to their share of the commonhold;
- bear the cost of the management and maintenance of common parts;
- comply with health and safety regulations and standards of hygiene;
- provide access to their own property or parts thereof, if necessary for the investigation of, design and planning of, or conduct of repairs, renovations etc, as above.

Typically, the General Assembly of Commonhold Owners chooses a Manager (which in larger developments may be a maintenance company co-owned by all unit owners or set up as a business), such Manager running the day-to-day affairs of the development.

Your Property is Being Rented out: Solutions

Q: I’ve discovered that my property is being rented out to other people for their holidays without my knowledge.  What should I do?

A: The approach you can take would likely depend on whether there is a letting and management contract in place between you (as the owner of the property) and the developer (or a party related to the developer, etc - for short we refer below to all such as the developer). In some such cases, the developer has the right to rent the property out.

If there were such a contract, and it entitles the developer to act as a lettings agent, then you should look to the contract to claim the rental income back from the developer: as an owner you would generally be entitled to it by default. If you would like letting without your prior consent to stop, then you need to request and negotiate an amendment of the contract in this sense.

Where a developer, etc, has no contractual right to let your property or the occupants have not been let in by such a letting agent acting on your authority, you should give notice to the occupants to vacate the property and we can advise further on the mechanism involved. In case any occupiers fail to comply, you may apply to a court to evict them and  claim compensation from them via the court for the unlawful use of your property.

Consideration in Real Estate Transactions: Recent Amendments

New provisions (in force from 01/07/2011) were incorporated in the Notaries and Notarial Business Act (NNBA).
According to the new paragraph 8 of Article 25, NNBA, when performing legal acts for the creation, transfer, amendment or termination of property rights in real estates for consideration, the parties are obliged to declare in the contract itself that the price specified in it is the agreed consideration. Pursuant to the new para. 9 of Article 25, NNBA, where the total consideration due under the contract exceeds BGN 10,000, any payment of that consideration must be effected either to a special bank account of the notary, or to a bank account chosen by the parties.
A new Article 25a, NNBA institutes such notary public-held accounts.
The terms on which payments by the parties are made to the special notary bank account and the deposits are then disbursed are set out in a written agreement between the notary and the parties to the contract.
Such accounts are protected from enforcement for obligations of the notary.
These new provisions correspond to recommendations of the European Commission to Member State governments to legislate for the prevention of money laundering through property transactions, as well as for tackling corruption and property fraud. The changes also prevent concealing the real consideration. In turn, this cures evasion of local taxes payable upon acquisition of real estates and improves the quality of market information.
Less obviously, the changes in the NNBA would help in proving the authenticity of effected payments, as well as the receipt of the agreed price by the party to the contract. This should reduce litigation, enhance the legal certainty of the property transactions and the legitimate expectations of the interested persons.

Recent work:

An ~€1M claim on behalf of real estate consultants

NBLO’s dispute resolution lawyers represented UK-based real estate consultants who had structured a € 40-million-worth commercial property project on the Bulgarian Black Sea coast.  In breach of an applicable contractual obligation, the consultants had not been paid the agreed success fees for their services. The then director of the defaulting party had been tragically shot dead in the meantime.

Following a hotly contested first instance, with below-the-belt attempts by the other side (the least untypical perhaps being the claim that the contract had been a forgery and a trial-within-a-trial on the issue), our team succeeded in obtaining a judgment at first instance.  The parties were then able to achieve a significant settlement.

The key skills we were able to bring to bear in providing a solution included searching for solutions across the problem domain; appropriately involving representatives of Bulgaria’s EU partner member-states to buttress judicial independence; and resourcefully dealing with heterodox approaches by our judicial opponents.

© New Balkans Law Office 2019